Bitcoin prices declined sharply over the past few weeks, as a sell off in the price of Bitcoin futures by the CME Group coincided with the price of Bitcoin hitting a four-month low. However, Bitcoin’s performance was not as bad as that of gold, which saw its price surge nearly 4 percent in the week after the CME Group’s announcement.
The price of Bitcoin plunged from over $5000 in late 2017 to below $1000 at the start of 2018, and it was at this point that investors began to see a potential gold bull market in gold and silver.
For the past few years, gold has been the best performing asset in the global markets. However, its performance in the past few months has been marked by a sharp sell-off. On May 13, it fell by 5.3% on May 14, and on May 16, it fell by 8.2%. On May 17, the market observed yet another massive sell-off in the gold price. Batsimritsas, the author of this article, argues that it was Bitcoin’s sell-off that served as a catalyst for the rise of gold.. Read more about bitcoin breakout imminent and let us know what you think.May was a testing period for cryptocurrencies like bitcoin (BTC). The flagship digital asset has already fluctuated after jumping to nearly $65,000 in mid-April, driven by traders’ sentiment to lock in their gains. Elon Musk has accelerated sales by scrapping his company’s plan to accept bitcoin as payment for Tesla’s electric cars. Later that month, the People’s Bank of China again urged the country’s financial institutions not to use virtual currencies for payments. Chinese authorities are also starting to closely monitor crypto-mining, the process by which computers mine cryptocurrencies like bitcoin. Further blows to the cryptocurrency sector have come from U.S. fiscal and monetary authorities, including Federal Reserve Chairman Jerome Powell, who said tighter regulation was needed. All in all, a series of negative reports caused the cryptocurrency market to lose more than $500 billion in May. The digital reference index bitcoin also came under aggressive downward pressure, falling 35.50% over the month. Bitcoin is experiencing a sharp reversal on its monthly charts after plunging in May. Source: BTCUSD on TradingView Meanwhile, exchange traded funds that trade physical gold (ETFs) posted their strongest monthly performance since September 2020 in May 2021. According to the World Gold Council (WGC), funds raised a total of $3.4 billion worldwide, up from $4.8 billion in September. In total, US gold ETFs saw inflows of $2.1 billion. European gold ETFs recorded deposits of $1.6 billion. Asian funds that track precious metals prices, however, experienced outflows of about $300 million. Block diagram of the ETFGold. Source: WGC The strong demand for gold ETFs has also boosted the spot price of gold. As a result, the XAU/USD exchange rate rose 7.6% in May to $1,912.785 per ounce.
The opposing movements in the bitcoin and gold markets suggest that a negative correlation between the two has emerged in the short term. Moreover, Wall Street veterans Nick Colas and Jessica Rabe wrote in their DataTrek research report that the virtual currency sell-off may have made gold more attractive to institutional investors. Market strategists predicted that bitcoin would be a riskier alternative to gold. At the same time, they noted that the value of the precious metal has not halved in five weeks due to Elon Musk’s tweets and has not responded to threats from politicians to ban it. Compared to virtual currencies, gold is an investment without drama. Therefore, we always recommend holding 3-5% gold in diversified portfolios. Bitcoin is primarily a speculative gamble for the rich and small individual investors looking for quick profits. But the large supply of BTC has also allowed it to benefit from fears of rising inflation, just like gold. Companies like Tesla, Ruffer Investments, Square and MicroStrategy have added bitcoin to their cash balances. They did so to offset the inflationary risks resulting from the Federal Reserve’s unprecedented expansionary policies, including near-zero interest rates and a $120 billion-a-month asset purchase program. These high-profile investments played a key role in bitcoin’s price doubling in the first quarter of 2021 to $65,000 in mid-April, thanks to leveraged bets and an influx of new retailers into the market. Gold ETFs, on the other hand, have had six consecutive months of outflows through May 2021. Analysts at JPMorgan reported in January 2021 that gold ETFs lost about $7 billion in the same period. The Grayscale Bitcoin Trust (GBTC), a trust run by New York-based Grayscale Investments, has raised $3 billion. The lack of capital inflows into precious metals funds has also depressed their spot prices; XAU/USD ended the first quarter of 2021 down 10.14%, compared to bitcoin’s 100% return. In May 2021, another report from JPMorgan indicated that large institutional investors had seized on bitcoin to seek opportunities in gold. They cited data on open interest in bitcoin futures on the Chicago Mercantile Exchange, which saw the biggest drop since October 2020. said analysts at JPMorgan: The picture of bitcoin inflows continues to deteriorate, indicating continued restructuring by institutional investors.Bitcoin (orange) has an inverse trend to gold (pink) in 2021. Source: TradingView The claims came as Ruffer Investments, a U.K.-based fund that manages about $33.95 billion in assets and charities, also announced Tuesday that it had unloaded its entire bitcoin position and made $1.56 billion in profits. Duncan McInnes, chief investment officer of Ruffer, told Finance Times that they have shifted funds into gold, commodity stocks and inflation-linked bonds. McInnes added that bitcoin is still on the menu for Ruffer’s possible future investments, noting that the world is in desperate need of a new safe haven against ultra-low bond yields.You’ve probably heard of cryptocurrencies, such as Bitcoin. But you may have also heard about another form of digital money called gold. The two digital assets have a lot in common, which might make you wonder whether Bitcoin could be a good investment. If you’re looking to invest in gold, you have a lot to consider, especially when the price is plummeting and the markets are predicting an economic slowdown.. Read more about bitcoin expert predictions and let us know what you think.
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